Futures Rising; Cliffs Up 8% Post-Earnings

By Sam Mamudi

Futures for the Dow Jones Industrial Average are showing a 0.3% gain ahead of Thursday’s bell, while the Standard & Poor’s 500 index is up 0.4%.

Cliffs Natural Resources (CLF), this year’s S&P whipping boy, is up more than 8% after its first-quarter earnings. Even though profits plunged from the year-ago period, Cliffs seems to be winning investors over for beating profit estimates and showing that it can adjust to changing iron ore prices:

In the past six months Cliffs has idled some production at mines in Michigan and Minnesota, cut its dividend by 76 percent and sold equity and depositary shares to raise $995 million after the price of iron ore slumped. The company also announced in November it would postpone the expansion of its Bloom Lake mine in Canada.

“When the wind changed, these guys adjusted the sails,” Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Washington, said in a phone interview today. “The cost decreased and average iron-ore prices increased. That’s exactly what you want.”

Cliffs cost of goods sold and operating expenses in its U.S. iron-ore division fell 8 percent to $252.8 million while its cash cost per ton at U.S. mines fell by 1.6 percent. Per-ton cost at its Eastern Canadian division dropped 4.4 percent to $99.41 a ton, the company said in the statement.

The company, one of the country’s largest homebuilders, is seeing strong demand as the spring home-buying season heats up, with higher traffic and a “greater sense of urgency” from potential buyers due to the limited supply of homes and rising prices, said CEO Richard Dugas.

Demand for homes, more than six years after the housing bubble burst, is growing due to steady job creation and very low mortgage rates. A low inventory of homes for sale has helped drive more construction of new homes and has also helped boost prices.

The Bloomfield Hills, Mich.-based company said Thursday that the number of homes it closed on during the quarter rose 23 percent 3,833, while the average selling price was up 10 percent to $287,000. New orders rose 4 percent to 5,200.

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